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10 June, 2012

No credits due as forests plundered :

Peatland recently cleared by burning near the village of Kayee Lon in Aceh.

IN 2007, young Australian entrepreneur Dorjee Sun began a mission to save the world. He criss-crossed the globe with a documentary crew, inserting himself into climate change negotiations in a way that eventually made him one of Time magazine's ''Heroes of the Environment''.

At the same time, climate change was killing then prime minister John Howard. An Inconvenient Truth was playing on Australian screens, the Stern report shocked the world and opposition leader Kevin Rudd was capturing the popular mood that something - anything - must be done.

It was, in retrospect, the high-water mark for belief in action on climate change and low tide for the sceptics. It was in this atmosphere that Howard and Sun both found climate salvation in the same place - the tropical peat forests of Indonesia.

Anwar Ibrahim, his wife Fatima Yani and their child Muhammad Irfan. Ibrahim has lost faith in REDD. Photo: Michael Bachelard

''What are we going to do now, this year or next year, to make a difference?'' a fervent Dorjee Sun asks in his documentary, The Burning Season. ''Because the forests don't have that long.''
Howard's answer to the same question was a massive cash injection.

''Australia will form a global fund to fight illegal logging and forest destruction worldwide,'' page one of The Australian announced on his behalf in March of that election year, ''with the aim of halving the rate of deforestation and achieving greenhouse gas emission reductions 10 times greater than under the Kyoto Protocol.''

It was Howard's silver bullet, his version of a ''direct action'' pledge that cleverly skirted his refusal to sign Kyoto. In December, the United Nations caught up, agreeing in Bali, amid backslapping and cheers, to accept Reducing Emissions from Deforestation and Forest Degradation, or REDD, as a valid way of tackling greenhouse gas emissions.

A team paid to clear the forest from the peat swamp near the village of Kayee Lon in Aceh. Photo: Michael Bachelard

Five years on, the silver bullet has misfired.

The REDD schemes in Indonesia funded with Australian government money have come under serious criticism for overstating their aims and under-delivering on results. Greens leader Christine Milne recently labelled the largest of them a ''total failure''.

The private sector has fared even worse. Most of the for-profit schemes in Indonesia have faltered or fallen spectacularly, recriminations flying.

Dorjee Sun's landmark project is one of them. A deal he set up with the government of Aceh, Indonesia's westernmost province, to develop a carbon credit scheme has stalled, perhaps fatally, and 770,000 hectares of forest is in limbo.

Sun himself, in the eyes of the environmental lobby, has sold out. For cash and shares worth millions he sold half of his business to a Canadian gold mining company whose aim is to turn a forest-clad mountaintop into an open-cut mine using cyanide leaching to extract the riches.
His partner in the effort, former Aceh governor Irwandi Yusuf, was so disillusioned with REDD he accused the global community of using his region as a ''carbon toilet''.

Five years after high tide, Indonesia remains one of the biggest deforesters on the planet. Once Australia's best hope for REDD, it is yet to generate a single carbon credit or earn one dollar for preserving its forests. Credible observers wonder if it ever will.

For the Gillard government, this is more than just a historical problem.

Labor's carbon trading scheme, which begins its fixed-price period on July 1, needs a big supply of carbon credits sourced from other countries. Without 434 million tonnes of offsets bought offshore per year by 2050, Treasury believes Australia cannot meet even its modest greenhouse reduction targets.

Until now, it has been believed saving Indonesian forests could supply many of these offshore credits quickly and cheaply. ''A post 2012 outcome that puts us on a path to 450 [parts per million of carbon dioxide in the atmosphere] is only achievable with comprehensive coverage of REDD,'' said then climate change minister Penny Wong in 2009, adding that it would reduce the cost of global emission reduction ''by around 20 to 25 per cent''.

The government's National Carbon Offset Standard announced in March makes it possible for businesses to buy forestry credits, with suitable safeguards. But as things stand now, even if a global carbon trade materialises, many wonder if Indonesian forests can ever play a part.

''REDD? It's like farting,'' says one local villager between sips of the famous coffee in Aceh. ''It's like selling air. It doesn't make sense.''

In concept, REDD is simple. Every tonne of carbon locked up in peatlands or inhaled by trees, and saved from logging or palm oil plantations, creates carbon credits. These can be sold to big companies that cannot reduce their own emissions for a lower price and the profits go to the forest communities, local governments and project proponents.

In theory it's a win-win-win: emitting companies gain access to cheap credits; the forests and their orang-utan, tiger and elephant populations are preserved; and the income stream replaces the money on offer from the loggers, miners or palm oil plantations. But these benefits have been excruciatingly slow to emerge.

Anwar Ibrahim is a farmer and a mukim - the leader of several villages - at the edge of the Ulu Masen conservation area. Ibrahim sits with his family on the wooden floor of a hut in one of his paddocks near the village of Sayeng, chuckling robustly. ''They're talking about selling air! But it's not whether I agree or disagree with that expression, it's simply that it doesn't exist, it doesn't happen.''

As a mukim, Ibrahim has attended multiple meetings - he counts 31 since 2007 - on REDD. At a recent meeting they were warned solemnly about potential corruption in a program that does not even exist.
This area was the hardest hit in the 2004 tsunami, and non-government organisations of all sorts have helped rebuild. The only ones, says Ibrahim, whose advice has been worthless are the ones spruiking REDD. ''They invite people and then we all go and sleep in the Hermes [Banda Aceh's only luxury hotel], and after that nothing happens … It's useless. The story of REDD is just a lie.''

Ibrahim is careful to make clear he wouldn't mind being paid cash to save the forests. He turns to me, grinning broadly, and says: ''Australia! Send us your money!'' He insists, however, there is no need for it because the local people have learnt to look after the forest anyway. But about 20 kilometres down the road, the smell of recent burning belies his faith.

Here, near the village of Kayee Lon, the ground is black, the forest devastated. This fire is fresh, was deliberately lit and was designed to clear the forest for palm oil.

An 11-man crew is clearing the burnt trees then cutting down more for firewood. Their leader, Safari, says they have been working for local land-owners since 2007, busily clearing forests at the rate of about 15 trees per day.

The ground underfoot is soft. Step too heavily and your foot sinks deep. This is peat and it contains millions of tonnes of carbon dioxide. As long as the water-soaked forest is intact, the carbon remains locked in place. But as soon as it is cut and burnt, then drained via canals for agriculture, the woody mass - which can be metres thick - decomposes, releasing its stores of carbon dioxide into the atmosphere.

Sumatra, Borneo and West Papua have among the richest peat forests in the world. Those in Borneo alone hold up to 70 times the carbon emitted annually by the combustion of fossil fuels worldwide.
The forest in this beautiful, mountainous province remains relatively intact because for decades the fierce combatants in the Free Aceh Movement's separatist battle against Indonesia used it for refuge. But that is beginning to change as people seek out economic opportunities.

The burning in Kayee Lon is probably illegal. Under national laws, clearing deep peat is prohibited. But good luck getting these laws enforced. On one fire-scarred plot, marked and unmarked police cars unload oil palm seedlings. Workers tell us ''high-ranking officials'' from the Aceh police force actually own the land. ''Everyone has a permit,'' insists a worker, Syukul, on a neighbouring piece of land.
This may well be true. In rural Indonesia, land title is rarely clear. And it's not just the forest that's tangled and impenetrable.

When democracy came to Indonesia after 1998, the government in Jakarta radically de-centralised, conferring significant power on local authorities and regional (the equivalent to Australian state) governments. These local governments issue permits over land with very little scrutiny. Corruption is rife, and the judges are as bad as the bureaucrats - in Aceh, 20 million rupiah ($A2200) is enough to get criminal charges dismissed.

But when Dorjee Sun first came to Aceh in 2007 and sold the miracle of REDD to his new friend, Governor Irwandi, none of this seemed like an obstacle, and it is not suggested that either have acted dishonestly.

''I did make a lot of promises to him,'' Sun tells The Saturday Age. ''I painted a picture which I guess only a naive 29-year-old can do, which was, 'Hey, Gov! Trust in this market which is going to happen and you will be paid for this forest protection'.''

Sun and Irwandi's plan was to save 770,000 hectares of this forest, home to 982,000 people as well as orang-utans, elephants and Sumatran tigers. Every year for the next 30 years, 3.4 million tonnes of carbon dioxide emissions would be avoided and the credits sold on the global carbon market.
They even convinced American banking giant Merrill Lynch to trade the carbon credits for them in an options deal worth up to $10 million. The deal made modest celebrities of Sun and Irwandi, who were portrayed as practical environmentalists using the profit motive to save the planet. Sun became a 2009 Time magazine Environmental Hero; Merrill Lynch won the 2008 Carbon Finance Transaction of the Year.

Sun is not so naive any more. The contractual negotiations were gruelling and the local politics complex. Even an accurate map of the area proved elusive. Then last year his sponsor, Irwandi, became involved in a fight for his political life which, two months ago, he lost. A spokesman for Irwandi's replacement as Aceh governor, Zaini Abdullah, would say only that everything to do with Ulu Masen was now under review.

Dr Jeff Carmichael, a businessman and foundation chairman of the Australian Prudential Regulation Authority, has a ''seven-figure sum'' invested in Sun's project. He remains fully supportive of Ulu Masen, but says the biggest risk has always been Aceh's politics. If the new governor goes cold, the project ''probably comes to a stop; there's no point putting more money into it''.
In Sun's view, the biggest problem was the failure of the global community to come up with a large-scale carbon market for REDD credits. Carbon credits are now bought and sold on what is called the ''voluntary market''. Airline companies use this to offset the emissions from their flights, as do some manufacturing companies to paint themselves green.

If a global trading market ever evolves under the United Nation's painfully drawn-out processes, it would be a ''compliance market'' vaster, deeper and more able to provide financial incentives to develop REDD schemes. But the only existing market, run by the European Union, does not accept forest credits.
The Rio+20 summit this month marks 20 years since the first Earth Summit, but a global trading system still seems a long way off. Without this, what Sun calls ''the cavalry of carbon'', any large-scale REDD scheme is going to have trouble competing against the other possible land uses in Indonesia.
So, as illegal burning and mining continues, Sun's project is becalmed. Some of the forest rangers who are employed to protect the trees ''still cut the trees themselves'', says Firman Hidayat, who once helped train people here in REDD.

Sun says he has not given up, but he has changed his idea of what's possible. He is now focused on ''REDD 2.0'' - doing direct deals with big companies to protect the remnant forests within their concessions.

In Ulu Masen, REDD 2.0 meant ceding a forest-clad mountaintop, Miwah, a half-day trek from the nearest road, to a company that wants to make it into a 6000-hectare, open-cut gold pit. In May last year, Sun sold half the shares in Carbon Conservation to Vancouver-listed miner East Asia Minerals for $US700,000 plus 2,584,210 shares - then worth $3 million - in the mining company. The gold under Miwah is worth $5 billion.

East Asia Minerals does not yet have a permit to mine it because it lies underneath protected ''primary forest''. But environmentalists have accused Sun of allowing the company to improve its chances of gaining government approval by ''greenwashing'' the venture. Elfian Effendi of respected Indonesian organisation Greenomics, argued that Sun used the carbon project as collateral to make money. And Frank Momberg, the chief of Flora and Fauna International - Sun's former environmental and community partner in Ulu Masen - says he no longer has a relationship with Carbon Conservation.

According to Sun, the deal was a genuine attempt to sacrifice a small part of Ulu Masen to protect the rest. The miner would pay ''substantial'' royalties to save the forests outside the actual mining zone. Sun says the gold company's former CEO Mike Hawkins, was sincere in his desire to develop ''green gold'' - an environmentally friendly product that could be compared to ''blood-free diamonds'', using new, green mining techniques.

But East Asia Minerals has changed chief executive twice since then. Late last year it installed Ed Rochette, a renowned mining Mr Fix-it who told a recent conference in Bali Indonesia was, ''without a doubt, one of the top-three places [in the world] for current investment in mineral projects''.
Sun concedes Rochette regards the ''green gold'' deal as a legacy issue and ''not really something that he would have done''. Any pretence of special mining techniques has also disappeared from East Asia's releases - Rochette said in January ''the ore [at Miwah] should be able to be processed in a conventional gold cyanidation circuit''.

The gold deal has severely dented Sun's reputation in Aceh. ''They heard it and said, 'Oh, we are cheated','' recalls Hadi Daryanto, the secretary-general of Indonesia's forestry department in Jakarta.
One of Governor Irwandi's senior environment advisers, Wibisono, has said the deal destroyed trust. ''People started to think that … the intention was not to protect the environment, [but for Sun] to occupy all that land, and then later on-sell it to the mining company or plantation.'' Since then, he says, the mining company has tried every method possible to have the forest re-categorised, including approaching the government through its powerful ex-combatant constituency.

For his part, Irwandi has become morbidly disillusioned with the failed promise of REDD. Three months after Carbon Conservation inked the Miwah deal, he issued a permit for a palm oil company, PT Kallista Alam, to use 1605 hectares of peat swamp for a plantation in the Tripa conservation zone.
When the peat swamp burnt, killing an estimated 100 orang-utans, Irwandi said the environmental disaster was his ''pinch'' - a wake-up call - to the world. ''The international community think our forest is a free toilet for their carbon,'' he told The Saturday Age in April. ''I wanted some funds to create a livelihood for people who lost their jobs [when the forest was locked up]. The money did not come. REDD or blue I don't care. Where is the international attention on that?''

Sun says he is still on good personal terms with Irwandi, and argues passionately that the deal with the mining company was both pragmatic and necessary.

''In Indonesia … do you think $5 billion of gold would end up never being extracted? Honestly? I knew whether it was them, or a tycoon, or the new governor's brother or some minister's cousin … someone is going to get that gold.'' Better, he says, that it be exploited by a listed international company with corporate responsibilities to shareholders. Nevertheless, he says he agonised over the deal. ''I'm probably not going to go to environmentalist heaven any more … But far out, man! Shit. I mean, five, six years in Indonesia, you realise that you've got to play the game smarter.''